When a tax-exempt entity is both able and willing to lend its exemption to other taxpayers, tax-averse parties line up to take advantage of its largesse (and, in the process, reduce their own tax bill). Congress, eager to prevent such abuse of the exemption, decided that, in some circumstances, it would tax entities that would otherwise be exempt from taxation. In this Article, I show that Congress’s response to such “lending” has failed to solve the problem and, in fact, is harmful to the tax system and to tax-exempt entities. To address this problem, this Article proposes a new way to prevent such lending—one that builds upon existing law—in order to combat the abuses perpetrated through tax-exempt entities. Congress should repeal the unrelated debt-financed income rules, which experience has shown are ineffective and harmful. This repeal would end the distortions that tax-exempt entities currently face. At the same time, in order to prevent tax-exempt entities from lending their exemptions to taxpayers, Congress should expand the tax shelter rules to capture these abusive transactions.